Financial Planners and Negotiations

Financial Planners and Negotiations

Posted: Wed Oct 11, 2017 12:27 pm

by bogleviewer

I just made another thread about DFA funds which are only offered by advisers. I'm a big time DIY, but I also see the value in having someone else's opinion and perspective. I would imagine that most DFA advisers share a lot of the same philosophies as diehard Bogleheads.

So if one was going to work with an adviser, is their fee negotiable? My understanding is that the industry standard is 100 bps (1.00%) of assets under management (AUM). This seems absurd for a few hours of consultation and clicking around once a quarter or so for a client a lot of which I imagine is automated (rebalancing). I realize that some clients may be a drain of time and an adviser earns the 1.00%, however for more DIY type people or more knowledgeable/less needy clients, they are making big earnings on an hourly basis and is very scaleable.

So, for those of you who ARE advisers and for those of you who have used or have negotiated with advisers, ARE THEIR FEES NEGOTIABLE?

Are their fees LEGALLY negotiable? I could see a potential discriminatory lawsuit if purple people are paying 1.00% while blue people are paying 0.50% which is the only one reason why I believe they may not be negotiatable.

I have an adviser relative who I chatted briefly about this at a dinner party and he said that he publishes his fees every year (didn't say to whom he publishes) and that he is bound by his fees. I don't believe this but again it could be true hence I'm asking the Bogleheads!

Re: Financial Planners and Negotiations

Posted: Wed Oct 11, 2017 12:39 pm

by livesoft

I always assume everything is negotiable. If you have something to offer, then by all means negotiate. If they say No negotiating, then you know.

I wouldn't take what anybody says on the internet as fact without confirming for myself.

Re: Financial Planners and Negotiations

Posted: Wed Oct 11, 2017 12:44 pm

by Jack FFR1846

I can't say first hand because every adviser I ever interviewed turned out to have graduated from Clown College. But I've seen quite a few times in questions here where members talk about being with an adviser who normally charges X% but that they get some special deal of 1/2X% to stay.

I'd ask you.....why can't you ask your questions here? It's free and advice is generally very good and from various perspectives.

What is it with rebalancing that people are so scared about. As I have said many, many times, I do it once a year on my birthday and it's a 15 minute exercise. Actually, this past January, I opened my spreadsheet, saw that nothing needed to move and closed it. I think my cat jumped up and I spent more time patting her head than I did on rebalancing.

Re: Financial Planners and Negotiations

Posted: Wed Oct 11, 2017 12:57 pm

by Random Walker

I use an advisor, and I do think there is some room to negotiate fees potentially. Realize that there is wide variation on the services offered by different advisors, and that differences in fees will likely reflect that. So far, it seems you are only looking for portfolio maintenance. Even there, different advisors can provide different levels of service. Some may be more or less aggressive in tax loss harvesting or considering new products.

Dave

Re: Financial Planners and Negotiations

Posted: Wed Oct 11, 2017 1:01 pm

by neurosphere

My thoughts.

-- Legally, fees are of negotiable as with any business. I have never seen or heard of any FINRA/SEC/ETC rules which prevents this. That does not mean that discrimination is legal.

-- But it can be policy, not law, within a firm which sets the fee, and the boss might not allow negotiation. You can imagine a firm with multiple advisors, each dropping their fee to gain clients and it becomes a race to the bottom.

-- It can be personal policy not to negotiate. My rates are essentially at the lowest possible that end up with me making about $20/hour profit. Any less than that and I would just as soon devote those hours to the not-for-profit side of my life.

-- You mentioned "published" fees by a relative. Most likely he means those are published in his "ADV" form. These forms are required for all advisor firms, and there is a section for fees. "Item 5 -- Fees and Compensation". For reference, here is the "Part 2" ADV of Allan Roth's firm. https://adviserinfo.sec.gov/IAPD/Conten ... _ID=451063 He lists his fee as not negotiable, but then also mentions it can be negotiated at the firms descretion. On my ADV, I instead list a range and imply that there may different fee depending on the scope/type of work, to allow for flexibility. E.g. some people literally just want general advice or help with something very small that does not have a lot of "friction" or does not require me to "think". So I might give a "discount" on the rate on the website, but within the range on my ADV.

-- Based on your other thread, it seems you essentially want access to DFA funds, but don't necessarily need the full range of "services" an advisor might be expected to provide for a full 1% (or whatever) AUM fee. One of the first hits I got on Google for "fixed-fee DFA advisors" was this (http://www.flatfeeportfolios.com/invest ... s/flatfees) where the fee is as low as 0.33% for assets of $1M, and seems to get you access to DFA funds. Note that they only include asset management, and explicitly exclude "financial planning".

Re: Financial Planners and Negotiations

Posted: Wed Oct 11, 2017 1:02 pm

by Ethelred

If you really are certain you need a financial advisor, why not use a fee-based advisor?

Evanson Asset Management® (EAM) is a fee-only advisor and receives no compensation other than from our clients. We charge a fixed quarterly retainer fee based approximately upon the total number of hours required to service a family's accounts. A typical family will have three or four accounts, both taxable and tax-deferred. Typical fees run from $625 per quarter or $2,500 per year to $2,000 per quarter or $8,000 per year and that covers all accounts for a family. We manage some smaller accounts for less and a few very large family accounts with multiple trusts and objectives for more. If calculated on a percentage basis our typical client is paying between 0.05% and 0.15% annually on assets though we use a fixed fee that doesn't change as the value of assets change, not a percentage fee.

EAM is a full-service investment advisor. No services are omitted and access to consultations is not restricted. We begin by assisting you with setting up, transferring or linking your accounts to us with a broker/custodian. We then spend as much time as necessary developing an investment allocation plan for you which takes into account assets held elsewhere we do not manage as well as those we directly manage. After the plan meets your approval we implement it, sometimes in steps and sometimes all at once. We never make changes or place trades in your account without a plan in place along with your specific email approval of the trades we are going to make for you.

Re: Financial Planners and Negotiations

So, for those of you who ARE advisers and for those of you who have used or have negotiated with advisers, ARE THEIR FEES NEGOTIABLE?

Absolutely. Did this on behalf of a relative and reduced the written-in-stone fee by 70% to essentially Vanguard PAS level. Interviewed four others (years ago, different context) and all had a "So what kinda numbers are ya thinkin' about?" vibe. I was surprised how fluid this all was. As in all negotiations, it helps to be coming from a position of some strength. Also, generating new business is harder than retaining old business so you can negotiate your fees down even with an agreement in place. And, as in all negotiations (like cars, etc.), I would of course not lead off with the "how low can you go?" angle but get them engaged first.

There was a recent thread that linked to some industry fee-benchmarking -- as an AUM model, it fell off very steeply with portfolio size.

Re: Financial Planners and Negotiations

Posted: Thu Oct 12, 2017 2:38 pm

by KSActuary

First, the value that a client receives from an advisor can be very different as clients have differing needs. Some want complete portfolio construction and management, plus financial planning advice while others may have a more simplified objective to the portfolio and are really looking for the financial planning advice only. Many clients are turned off by advisors because the advisor is basically telling them its my way or the highway, in terms of portfolio management. Advisors need to be more flexible and so should their fee structure.

We build everything from simple to very complicated portfolios for clients and charge accordingly. For example, a client may have a simplified index portfolio which integrates into a legacy portfolio of individual stocks. Clients can own significant real estate holdings which need to be reflected, etc. A straightforward portfolio can be as little as 30 - 40 bps and can be negotiated as a flat dollar amount regardless of future portfolio growth. Further complication in the portfolio construction may cause the fee to increase but our fees rarely go above 0.70%.